See i believe in money, power and respect...
It's the key to life
Money power respect
That you need in life
Money power respect
You'll be eatin' right
Money power respect
You can sleep at night
You'll see the light
It's the key to life
--Lil' Kim from Money, Power Respect
I am a big proponent of truth at all costs. To the question, “can you handle the truth,” I always answer, “yes, we can handle the truth!” But then sometimes, it may be, that once we know the truth, we are better served to just forget it. Lil' Kim's keys to life are nothing but myths, but, maybe it's good to believe. Sometimes.
(1) You can change the World!
Okay, forget what Time Magazine told you in 2006 (btw: they are on their way out of business). Of course you can not change the world! Obama can't change the world. Even these people have less power than we think (Forbes 400). We each are tiny, powerless, and no more or less potential to influence than anyone else. For everything we try to do, someone will try to do something different.
Still, that way of thinking gets us no-where. With everything you do (or don't do) imagine all 6.7 billion of the rest of us doing or not doing the same thing. It adds up. Also, if you act as if you have all the power in the world, a surprising number of people will actually believe you. If you believe in this myth and then others start to believe.... then, suddenly you are a mighty powerful force. Think small and act big.
(2) $$$$$$
[for those among us who are not actively investing our money: please continue reading all the way to the end]
Yes, Money is a Myth; we all know this. It is paper and tin* coins whose most valuable asset is our collective belief in its (constantly changing) value. It amazes me that some people are willing to murder, steal, and trade their personal integrity in bribe all to get a few extra leafs of these germ-laden lies. Looks like, the joke is on you, Madoff! Ha. ha… hmm.
It also amazes me how easily we all seem to wrap our brains around this myth: believing in money is like believing in an inch or a centimeter only every day someone (the market) convinces us to accept a new length for the same inch. Yesterday a dollar was that, today it’s just a little bit less and we move on. It’s incredible.
And now Paper Money has become its own ancient myth. As you know, the Federal Reserve Bank did not actually print new money to bail out the economy, it simply added zeroes to some vault-secured (I hope!) Excel workbook. I myself barely remember what cash looks like.
So why do we believe in this myth? Okay, I don’t need to say too much here: the alternative is bartering with real assets: I’ll trade you 20 Pokemon dragons for one Slurpee. We can all envision the mess.
NOW: To those of you who think the stock market is a joke, I'm with you. I do not trust corporations and I understand very little about the futures of stocks and hedges ….or the hedged futures of stock swaps… and, wait, forget stocks, can we just swap futures instead?...Anyway! The world of high finance and corporate charading is, quite frankly, silly. BUT it is no more of a lie than money itself.
In spite of some occasional blips, the values of business investments rise over time. Remember, fraud and schemers aside, most stocks and funds are tied to real businesses, real assets, energy plants in Montana that are generating more value every day. The stock market tends to rise over time while the value of currency is constantly eroded by inflation (that dollar that bought you a pack of cigarettes 15 years ago, won't even buy you a smoke today). If all you’ve got is cash, you’re going to have a lot less of everything tomorrow. Those who have will get and those who get are--- well, most often white. And their parents before them were white. And Santa Clause is also … white.
Don't get the wrong idea, the stock market is not a conspiracy but it isn’t magic either. No-one out there understands any more about it than you do. So here’s my bottom-line on the money myth: don’t kill for it, don’t freak if you loose some, but do play along! Myths are inflated by rules, so do some research and think long-term. The world is full of fake money, don’t you want some too?!
And finally, while I can reject my love of truth and embrace myths 1 & 2, this final myth, I believe, must be broken:
(3) YOU!!
Yes, even You are a myth. You are 100% made-up. Some bizarre amalgamation of your parent’s (mis-)teachings, genetic pre-dispositions, and chance life experiences of getting on one bus instead of another. Maybe there is some magnet of fate guiding this mess but we will never know (and if such a guiding force does exist, it may very well be Nike, J.Crew and Dwell Magazine pulling your strings… maybe God is at the top of the food chain and he pulls the corporate strings? Who knows!). In any event, you are completely free to be you! And everything you think you know about who you are can change on the instant. So break this myth and take singing lessons, man-up and tell your snot-nosed teenager to get a job, get a job yourself, practice patience instead of road-rage; practice road-rage instead of patience; just stop, stretch and grow! You are not who you think you are.
Thursday, August 13, 2009
Wednesday, August 12, 2009
We Are We Are
Listen.. people be askin me all the time,
"Yo Mos, what's gettin ready to happen with Hip-Hop?"
(Where do you think Hip-Hop is goin?)
I tell em, "You know what's gonna happen with Hip-Hop?
Whatever's happening with us"
If we smoked out, Hip-Hop is gonna be smoked out
If we doin alright, Hip-Hop is gonna be doin alright
People talk about Hip-Hop like it's some giant livin in the hillside
comin down to visit the townspeople."
-- Mos Def from Fear Not of Man
WE ARE THE ECONOMY.
Here is my list of the top 5 guesses about where I see us going.
(1) Collaborations and Partnerships
While the old economy relied heavily on contracting work (and potential liability) out; the products and services of the new economy will bring innovative collaborators in. Sub-contracts: out; participation agreements: in. Work product will be held in “common spaces” (such as Box.net) where various entities come together to work for the right to attach his or her name to the product. Giant food stores with no-name produce providers: Out; Farmer’s Markets: In.
[example: AT&T & iPhone both companies’ images are on the line for the whole of the product and the service. ]
(2) My Story is My Product
Alright, so this is old news. But it is another compelling argument as to why the strictly low-bid sub-contractor is on his way out of some markets. Companies, large and small are realizing the increasing role that image plays in cornering market share each player’s “story” stands to bring much more to the bottom line than being a low-bid contractor or service provider without a name. Your story and your company's logo will be front-and-center on the future’s product.
(3) Phase Out the Fee
The days of getting a pay-check just for showing up no longer compute. That old style economic structure does not encourage us to be competitive in the global market-place, it does not encourage us to produce our best work. Where possible, we will be moving to more commission-based and partner/member buy-in based kinds of pay structures. Not to pick on the big guys, but why can't fund managers be paid based on a percentage of their funds' performance; why can't corporate executives be paid based on a percentage of their companies' (reported) profits?
(4) URL is the New Y’ALL
And if you don’t know what URL stands for, yes, you need to go look it up right now. If a feature of your business does not have its own clearly coded location on the internet, does it exist? If you aren't sure sure, why don't you google it and find out? ...Okay, but seriously, I'm not just talking about computer and internet technology here but rather the technology of coding, storing, sorting and accessing information. This may sound like boring work, but remember: the New Economy's Librarian is HOT! So get at it! In the future every single document relating to your business will be accessible to you, your employees, your partners, and, whenever possible, the public all on the instant. You can no longer rely on Sandy in accounting to find that schedule to your 1994 tax return -- Let the woman retire already! The sooner you get your stuff organized, the easier your future will be.
(5) So Many Different People = So Much Fun!
Yes, that is the photo of the Spanish Men's Basketball team making "asian eyes" in their photo for the Olympics in China. Yes, the future will be a crazy, diverse mash of peoples and languages and cultures and hilariously charming customs. Yes, Asia will be increasingly more important as will the Middle East. And yes, cultural faux pas are inevitable. And Yes, I am so excited!!
"Yo Mos, what's gettin ready to happen with Hip-Hop?"
(Where do you think Hip-Hop is goin?)
I tell em, "You know what's gonna happen with Hip-Hop?
Whatever's happening with us"
If we smoked out, Hip-Hop is gonna be smoked out
If we doin alright, Hip-Hop is gonna be doin alright
People talk about Hip-Hop like it's some giant livin in the hillside
comin down to visit the townspeople."
-- Mos Def from Fear Not of Man
WE ARE THE ECONOMY.
Here is my list of the top 5 guesses about where I see us going.
(1) Collaborations and Partnerships
While the old economy relied heavily on contracting work (and potential liability) out; the products and services of the new economy will bring innovative collaborators in. Sub-contracts: out; participation agreements: in. Work product will be held in “common spaces” (such as Box.net) where various entities come together to work for the right to attach his or her name to the product. Giant food stores with no-name produce providers: Out; Farmer’s Markets: In.
[example: AT&T & iPhone both companies’ images are on the line for the whole of the product and the service. ]
(2) My Story is My Product
Alright, so this is old news. But it is another compelling argument as to why the strictly low-bid sub-contractor is on his way out of some markets. Companies, large and small are realizing the increasing role that image plays in cornering market share each player’s “story” stands to bring much more to the bottom line than being a low-bid contractor or service provider without a name. Your story and your company's logo will be front-and-center on the future’s product.
(3) Phase Out the Fee
The days of getting a pay-check just for showing up no longer compute. That old style economic structure does not encourage us to be competitive in the global market-place, it does not encourage us to produce our best work. Where possible, we will be moving to more commission-based and partner/member buy-in based kinds of pay structures. Not to pick on the big guys, but why can't fund managers be paid based on a percentage of their funds' performance; why can't corporate executives be paid based on a percentage of their companies' (reported) profits?
(4) URL is the New Y’ALL
And if you don’t know what URL stands for, yes, you need to go look it up right now. If a feature of your business does not have its own clearly coded location on the internet, does it exist? If you aren't sure sure, why don't you google it and find out? ...Okay, but seriously, I'm not just talking about computer and internet technology here but rather the technology of coding, storing, sorting and accessing information. This may sound like boring work, but remember: the New Economy's Librarian is HOT! So get at it! In the future every single document relating to your business will be accessible to you, your employees, your partners, and, whenever possible, the public all on the instant. You can no longer rely on Sandy in accounting to find that schedule to your 1994 tax return -- Let the woman retire already! The sooner you get your stuff organized, the easier your future will be.
(5) So Many Different People = So Much Fun!
Yes, that is the photo of the Spanish Men's Basketball team making "asian eyes" in their photo for the Olympics in China. Yes, the future will be a crazy, diverse mash of peoples and languages and cultures and hilariously charming customs. Yes, Asia will be increasingly more important as will the Middle East. And yes, cultural faux pas are inevitable. And Yes, I am so excited!!
Tuesday, August 11, 2009
The New Normal
I promised to get to the bottom of this "New Normal" phenomena. In a nutty shell, the New Normal is just a bad name for the same old ....
1. Consumer Patterns.
Per ABC News (who has a series of articles and videos on the subject):
“The New Normal: How has the recession changed the lives of average Americans? The worst financial crisis since the Great Depression and the ensuing recession have forced Americans to change their lives in ways large and small. It's a world of "new normals," with more belt-tightening, less income and, in many cases, a newfound gratitude for the most basic human comforts: family, home and health.”
It is true that American’s are cutting-back and saving more. But, to ABC I say: There is nothing “new” about a mother foregoing her three-figure salon appointment for a 15-minute stop at the Hair Cuttery. A bad haircut is not News. Selling a beamer in exchange for a Volvo is not news. National Lampoons Go to the Community Swim Club…. is. not. news.
Trust me, I come from a long line of coupon cutters and bargain shoppers. My great Nana Hildabidel and my pig-tailed cousin Madison could both tell you, there is nothing new about this normal.
For a more gruesome reminder of the Old Normal of shop-thriftiness: do you remember the WalMart stampede back in those sunny forecasted days of November 2008. Sorry for posting.
2. Ways of Doing Business
Per an article written by Ian Davis in the McKinsey Quarterly
“We are experiencing not merely another turn of the business cycle, but a restructuring of the economic order.”
Davis’ “New Normal” for businesses includes: (1) less financial leverage; (2) an expanded role for government; (3) a struggle between financial transparency and financial protectionism (he and I both rooting for the former); and (4) Asia.
I’m in agreement. Though I am not sure whether these four points fully constitute a “restructuring of the economic order.” More change than this is coming, I’m sure of it.
Finally, if people and businesses really need to bone-up and adapt to a New Economic Order, we really need to come up with a more encouraging name than the “New Normal.” This isn’t Joe’s Economy people, it’s ours.
1. Consumer Patterns.
Per ABC News (who has a series of articles and videos on the subject):
“The New Normal: How has the recession changed the lives of average Americans? The worst financial crisis since the Great Depression and the ensuing recession have forced Americans to change their lives in ways large and small. It's a world of "new normals," with more belt-tightening, less income and, in many cases, a newfound gratitude for the most basic human comforts: family, home and health.”
It is true that American’s are cutting-back and saving more. But, to ABC I say: There is nothing “new” about a mother foregoing her three-figure salon appointment for a 15-minute stop at the Hair Cuttery. A bad haircut is not News. Selling a beamer in exchange for a Volvo is not news. National Lampoons Go to the Community Swim Club…. is. not. news.
Trust me, I come from a long line of coupon cutters and bargain shoppers. My great Nana Hildabidel and my pig-tailed cousin Madison could both tell you, there is nothing new about this normal.
For a more gruesome reminder of the Old Normal of shop-thriftiness: do you remember the WalMart stampede back in those sunny forecasted days of November 2008. Sorry for posting.
2. Ways of Doing Business
Per an article written by Ian Davis in the McKinsey Quarterly
“We are experiencing not merely another turn of the business cycle, but a restructuring of the economic order.”
Davis’ “New Normal” for businesses includes: (1) less financial leverage; (2) an expanded role for government; (3) a struggle between financial transparency and financial protectionism (he and I both rooting for the former); and (4) Asia.
I’m in agreement. Though I am not sure whether these four points fully constitute a “restructuring of the economic order.” More change than this is coming, I’m sure of it.
Finally, if people and businesses really need to bone-up and adapt to a New Economic Order, we really need to come up with a more encouraging name than the “New Normal.” This isn’t Joe’s Economy people, it’s ours.
Same Old Panic is the Brand New Normal
It is beginning to seem official now, THE RECESSION IS OVER!!!
Finance Industry insiders are saying it! (Baron's Article)
On Friday, the government reports that the unemployment rate drops from 9.5 to 9.4%! (Washington Post;
Then yesterday Reuters got specific by citing a number of opinion surveys and labor, housing and other financial indicators to announce that, "Recession seen ending in third quarter." The third quarter.
But what do these sources know about it anyway? That is why, when making my own assessments on the state of the economy, I look to the single most important economic indicator I know of: my Dad. He works in the construction trades; his current report: busy with a forecast of more busy.
So why do I still feel panicky? I mean, I am no longer in the throws of a Great Crisis of Panic. I do believe that people believe that things are bouncing back. I believe that that belief is in itself is a self-fulfilling prophesy. And I really believe that in that far-off make-believe world of reality things really.... really, are not that bad. And in that make believe world of reality, the economy and its recession are really little more than an actualized collection of our own beliefs anyway. Okay, with that last part, I've now confused myself too.
To get tangible, I present you with Exhibit A (strictly hearsay): Partners of a corporate finance law practice call attorneys into a meeting. Lower level attorneys are instructed not to discuss things like a lack of work, especially to clients. They say that bankers are still feeling panicky (apparently I am not alone) and the worst thing to do would be to present them with evidence to support that panic. New forecast: sunny skies.
I've recently come across a phrase that's new to me: THE NEW NORMAL. I still have no idea what this phrase means (possibly different things to different people?) so I have some reading to catch up on. I first read about it in this Blog which seems to get at some ideas of more of the same, fake work and the such. I'm not sure yet, but I suspect that this New Normal might be at the root cause of my same old panic.
Finance Industry insiders are saying it! (Baron's Article)
On Friday, the government reports that the unemployment rate drops from 9.5 to 9.4%! (Washington Post;
Then yesterday Reuters got specific by citing a number of opinion surveys and labor, housing and other financial indicators to announce that, "Recession seen ending in third quarter." The third quarter.
But what do these sources know about it anyway? That is why, when making my own assessments on the state of the economy, I look to the single most important economic indicator I know of: my Dad. He works in the construction trades; his current report: busy with a forecast of more busy.
So why do I still feel panicky? I mean, I am no longer in the throws of a Great Crisis of Panic. I do believe that people believe that things are bouncing back. I believe that that belief is in itself is a self-fulfilling prophesy. And I really believe that in that far-off make-believe world of reality things really.... really, are not that bad. And in that make believe world of reality, the economy and its recession are really little more than an actualized collection of our own beliefs anyway. Okay, with that last part, I've now confused myself too.
To get tangible, I present you with Exhibit A (strictly hearsay): Partners of a corporate finance law practice call attorneys into a meeting. Lower level attorneys are instructed not to discuss things like a lack of work, especially to clients. They say that bankers are still feeling panicky (apparently I am not alone) and the worst thing to do would be to present them with evidence to support that panic. New forecast: sunny skies.
I've recently come across a phrase that's new to me: THE NEW NORMAL. I still have no idea what this phrase means (possibly different things to different people?) so I have some reading to catch up on. I first read about it in this Blog which seems to get at some ideas of more of the same, fake work and the such. I'm not sure yet, but I suspect that this New Normal might be at the root cause of my same old panic.
Tweak to the Proposed Consumer Financial Protection Agency Act
Wonks are Fine, but please, No More Wankers!
The Proposed Consumer Financial Protection (CFPA) Legislation lays out three major arms for the proposed Agency: research, rule-making and enforcement. My only tweak to the Act as currently drafted would be to more clearly spell out required feed-back loops among these arms, namely by ensuring that research is geared toward informing the rule-making process. Every research paper generated should have a cover page outlining the regulatory implications, rules affected and/or new rules proposed. Data sets created by the Agency in its course of examining and supervising the financial industry (redacted or coded as necessary for confidentiality) can be farmed out to Universities and think tanks who are in the business of producing high-quality theoretical research.
For a more complete and informed analysis of the CFPA as a whole, I'd recommend this article and research report by Adam Levitin Credit Slips: The Consumer Financial Protection Agency.
The Proposed Consumer Financial Protection (CFPA) Legislation lays out three major arms for the proposed Agency: research, rule-making and enforcement. My only tweak to the Act as currently drafted would be to more clearly spell out required feed-back loops among these arms, namely by ensuring that research is geared toward informing the rule-making process. Every research paper generated should have a cover page outlining the regulatory implications, rules affected and/or new rules proposed. Data sets created by the Agency in its course of examining and supervising the financial industry (redacted or coded as necessary for confidentiality) can be farmed out to Universities and think tanks who are in the business of producing high-quality theoretical research.
For a more complete and informed analysis of the CFPA as a whole, I'd recommend this article and research report by Adam Levitin Credit Slips: The Consumer Financial Protection Agency.
Risky Bubbles
Today's question: Do we have a risk bubble that is yet to burst?
By RISK, I am not talking about the game of global domination, I am talking about the industry for pricing (ie. Moodies, S&P, bank underwriters), managing (real best practices in the work place), mitigating (carefully crafted disclosure statements written by attorneys), selling (by companies who engage in known risks), and buying (in some form or another, all of us) of exposure to the chance of financial loss.
By BUBBLE we can imagine a child's game of blowing bubbles; sometimes we get big bubbles, sometimes we get little bubbles, whatever. What I wonder is whether the value and pricing of risk isn't, at this moment in time, just as arbitrary as children experimenting with different soap brands and strings and maybe some fans and great big belts with suspenders.... all to make some bubbles. Less metaphorically, and more financially speaking, I think that we've come to think of bubbles as being baseless overvaluation; values that fluctuate drastically from some thing's "inherent" value.
PRICING of anything is by nature a proportional measure. A price of one thing can only truly be understood in terms of its value relative to other things. A dollar bill, for example, is nothing but a teaspoon whose volume capacity changes on the minute. If we don't measure every thing simultaneously, we are bound to get little bubbles of value. This, as I understand it, is a way to make money.
The PRICING OF RISK is a little bit different. I understand nothing about how risk is valued. I am privy only to small pieces of the market. By way of example, here is what I have observed: Underwriters will assign higher risk to a portfolio of mortgage loans made to sub-prime (low credit-scoring) borrowers. This type of lending is riskier than prime lending. So banks bundle these loans together into a security that is sold to investors, paying attorneys to draft disclosures that over-encompass the universe of potential risks and "pass the risk buck" on to the investors. Insurance is purchased on these securities to cover the investors in case the chance of risk materializes into default (I'm sure there are well written nuances to spell out what types of risk the insurance does and does not 'insure' against). Then these securities are sold again. And again. New Representations and Warranties are drafted at each sale juncture and new insurance is purchased. The real risks are (1) not understood; and (2) everyone feels immune from whatever the risk may be.
The Atomic Hot Potato
I imagine a game of hot potato played with, lets call it: a risk bubble. Such a strange translucent balloon made of a film full of air. Oh, and since we're talking about risks, lets say that our air is laced with airborne contagions. And with each pass of this risk bubble, more germ-laden air is added, more money goes in and then the now bigger bubble is sold and passed along to the next person. Silly analogy, I know. But everyone is betting on this thing not bursting in his own hands.
My Fear is that these bubbles have been made and are still (post-"crisis") out there. When they burst, they will infect us all. This myth that risk can be "passed along" does not serve any of us.
Risk exists and it can be mitigated:
(1) Management of Risk: good managers can guide operations in ways to minimize risks, good lenders can make available fair loans that people can actually afford; statutes and regulations can strengthen fiduciary responsibilities and hold company officers accountable for the avoidance of unnecessary risks.
(2) Ownership of Risk: each of the buyers along the route can tie into a fair and proportional share of said risk. Distribute risk proportionately rather than bundle it into an un-owned and dangerous mass.
Clearly there is a lot that I don't yet understand about all of this business. For example, I'd like to look more closely at the fine print in AIG insurance policies. I'd like to look at underwriter's pricing formulas. There is a lot to be learned. Still, I suspect that fancy formulas and language might not get around the fact that we are fundamentally wrong about the way we look at risk.
One final thought: Environmentalists talk about True Cost Economics, which , as I understand it is setting prices that account for all the costs associated with a product: the cost of it's disposal and any other associated pollutant clean-up.
Currently, risk seems to be priced based on some myth of what it costs to avoid it. Maybe we need to accept that it can't be avoided and include all the potential downstream costs into our calculation of sharing risk. And then, take it for what it is: a risk of investing. Flip a coin and our risk may pay off, if it doesn't we simply each must swallow our own proportional share of said risk.
Disclosure: these thoughts and opinions are based on incomplete knowledge and may even contain some flat out mis-information. I am just blowing hot air bubbles here.
By RISK, I am not talking about the game of global domination, I am talking about the industry for pricing (ie. Moodies, S&P, bank underwriters), managing (real best practices in the work place), mitigating (carefully crafted disclosure statements written by attorneys), selling (by companies who engage in known risks), and buying (in some form or another, all of us) of exposure to the chance of financial loss.
By BUBBLE we can imagine a child's game of blowing bubbles; sometimes we get big bubbles, sometimes we get little bubbles, whatever. What I wonder is whether the value and pricing of risk isn't, at this moment in time, just as arbitrary as children experimenting with different soap brands and strings and maybe some fans and great big belts with suspenders.... all to make some bubbles. Less metaphorically, and more financially speaking, I think that we've come to think of bubbles as being baseless overvaluation; values that fluctuate drastically from some thing's "inherent" value.
PRICING of anything is by nature a proportional measure. A price of one thing can only truly be understood in terms of its value relative to other things. A dollar bill, for example, is nothing but a teaspoon whose volume capacity changes on the minute. If we don't measure every thing simultaneously, we are bound to get little bubbles of value. This, as I understand it, is a way to make money.
The PRICING OF RISK is a little bit different. I understand nothing about how risk is valued. I am privy only to small pieces of the market. By way of example, here is what I have observed: Underwriters will assign higher risk to a portfolio of mortgage loans made to sub-prime (low credit-scoring) borrowers. This type of lending is riskier than prime lending. So banks bundle these loans together into a security that is sold to investors, paying attorneys to draft disclosures that over-encompass the universe of potential risks and "pass the risk buck" on to the investors. Insurance is purchased on these securities to cover the investors in case the chance of risk materializes into default (I'm sure there are well written nuances to spell out what types of risk the insurance does and does not 'insure' against). Then these securities are sold again. And again. New Representations and Warranties are drafted at each sale juncture and new insurance is purchased. The real risks are (1) not understood; and (2) everyone feels immune from whatever the risk may be.
The Atomic Hot Potato
I imagine a game of hot potato played with, lets call it: a risk bubble. Such a strange translucent balloon made of a film full of air. Oh, and since we're talking about risks, lets say that our air is laced with airborne contagions. And with each pass of this risk bubble, more germ-laden air is added, more money goes in and then the now bigger bubble is sold and passed along to the next person. Silly analogy, I know. But everyone is betting on this thing not bursting in his own hands.
My Fear is that these bubbles have been made and are still (post-"crisis") out there. When they burst, they will infect us all. This myth that risk can be "passed along" does not serve any of us.
Risk exists and it can be mitigated:
(1) Management of Risk: good managers can guide operations in ways to minimize risks, good lenders can make available fair loans that people can actually afford; statutes and regulations can strengthen fiduciary responsibilities and hold company officers accountable for the avoidance of unnecessary risks.
(2) Ownership of Risk: each of the buyers along the route can tie into a fair and proportional share of said risk. Distribute risk proportionately rather than bundle it into an un-owned and dangerous mass.
Clearly there is a lot that I don't yet understand about all of this business. For example, I'd like to look more closely at the fine print in AIG insurance policies. I'd like to look at underwriter's pricing formulas. There is a lot to be learned. Still, I suspect that fancy formulas and language might not get around the fact that we are fundamentally wrong about the way we look at risk.
One final thought: Environmentalists talk about True Cost Economics, which , as I understand it is setting prices that account for all the costs associated with a product: the cost of it's disposal and any other associated pollutant clean-up.
Currently, risk seems to be priced based on some myth of what it costs to avoid it. Maybe we need to accept that it can't be avoided and include all the potential downstream costs into our calculation of sharing risk. And then, take it for what it is: a risk of investing. Flip a coin and our risk may pay off, if it doesn't we simply each must swallow our own proportional share of said risk.
Disclosure: these thoughts and opinions are based on incomplete knowledge and may even contain some flat out mis-information. I am just blowing hot air bubbles here.
Subscribe to:
Posts (Atom)
Posts
